White House Plans Public Appeal on Deficit

Counting on the Election's Momentum, President Obama Will Try to Marshal Support for Tax Increases, Spending Cuts

By

Damian Paletta and

Janet Hook

Updated Nov. 12, 2012 1:26 p.m. ET

WASHINGTON—The White House plans an aggressive public campaign to build support for its approach to reduce the deficit through tax increases and spending cuts, a sharp contrast to its private talks with Republicans that faltered last year.

The White House plans an aggressive public campaign to build support for its approach to reduce the deficit through tax increases and spending cuts, a sharp contrast to its private talks with Republicans that faltered last year. Photo: Reuters.

President Barack Obama will meet with labor leaders Tuesday and a number of chief executives on Wednesday, in an effort to solidify backing for his proposals.

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President Barack Obama, at a Veterans Day service Sunday, will meet with congressional leaders on Friday.
Reuters

Both groups carry sway with different segments of lawmakers on Capitol Hill. Mr. Obama also plans to travel outside of Washington to try and broaden national support for his proposal that includes tax increases on the wealthy—which White House officials believe won public backing in last week's election.

Mr. Obama has planned the meetings as policy makers start work to craft a package of deficit-reduction measures that could come in place of the so-called fiscal cliff, the mandatory spending cuts and tax increases scheduled to begin in January.

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His meetings with labor and business leaders come before he meets with congressional leaders Friday, evidence the White House believes Mr. Obama can use momentum from his re-election to marshal outside support and heighten pressure on Republicans to agree to tax increases on upper-income earners.

The strategy comes as many Republicans appear to have softened their antitax rhetoric in the wake of the election, with many openly acknowledging that higher taxes will likely be part of any plan to reduce the deficit.

Several Republicans, including House Speaker John Boehner and Rep. Tom Price (R., Ga.), have said in recent days higher tax revenue could be part of a deal. They have refused to consider higher tax rates, saying that new revenue should come instead from new limits on deductions and other tax breaks, suggesting one potential approach to a deal.

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Speaker John Boehner on Capitol Hill Friday, has suggested limits on deductions could be part of a deal.
Associated Press

Republicans also say significant changes to entitlement programs such as Medicare and Medicaid would have to be part of any package.

Illustrating the shifting ground, conservative commentator William Kristol said on Fox News Sunday, "It won't kill the country if we raise taxes a little bit on millionaires." This appeared to suggest Republicans offer Mr. Obama a deal that would raise tax rates on households making more than $1 million a year.

The White House hasn't yet offered a new deficit-reduction proposal since the election. It has offered numerous plans since 2009 that call for a combination of tax increases and spending cuts, but it was careful not to make public the details of its plan last year during negotiations with Mr. Boehner. White House aides have discussed whether offering a deficit-reduction "framework" during this debate might help discussions, but so far no such steps have been taken.

In September 2011, Mr. Obama released an 80-page deficit-reduction plan that included tax increases on the wealthy, spending cuts and modest changes to Medicare and Medicaid.

The White House wants roughly $1.5 trillion in new taxes over 10 years as part of a $4 trillion deficit-reduction package. To start, Mr. Obama has proposed letting tax rates rise to 39.6% from 35% on income over $388,350 for both couples and singles, which would raise roughly $440 billion in new revenue over 10 years, according to White House estimates.

If the two sides were to freeze current rates, as Republicans are advocating, there are many other options for raising revenue by $440 billion. For example, they could limit the ability of upper-income households to use breaks such as the deductions for mortgage interest and charitable contributions. They could raise rates on capital gains and dividends.

Both the White House and Republican leaders have said so far that the rhetoric from the other side has been encouraging.

Mr. Obama's new approach is in sharp contrast to his strategy last year, when he met privately with Mr. Boehner to try and craft a broad package of tax and spending changes to reduce the deficit. Now, Mr. Obama and his aides have promised to be much more flexible and seek outside ideas.

"I think there are a lot of ways to skin this cat so long as everybody comes with a positive, constructive attitude toward the task," Obama adviser David Axelrod said on CBS's "Face the Nation" Sunday.

When the talks between Messrs. Obama and Boehner broke down in August 2011, Democrats and Republicans had to rush to patch together a temporary deficit-reduction plan to give them political cover so they could raise the government's borrowing limit.

Forcing negotiations this time is the fiscal cliff, the combination of expiring tax breaks and mandatory spending cuts that will begin in January unless the White House and Congress can agree on a plan to postpone or replace the measures. Going over the cliff would likely send the country back into a recession, economists and budget experts have predicted.

These negotiations will be a high-profile test of Mr. Boehner's leadership of his own party conference, a balky, hard-to-lead crowd. He is walking a tightrope between the party's large conservative faction that has put a premium on confrontation and its more pragmatic wing. He is asking his colleagues to give him latitude to size up and navigate the new political landscape—and for now, at least, they seem to be giving it to him.

"The president won, and the tax cuts are ending, whether we like it or not,'' said a senior aide to one House Republican leader, describing Mr. Boehner's message. "So we have to figure out how to deal with it.''

—John D. McKinnon and Carol E. Lee contributed to this article.

Corrections & Amplifications President Obama proposes to let current income-tax rates expire for incomes over $200,000 for singles and $250,000 for couples. His proposed new top rate of 39.6% would apply to current incomes over $388,350 for both couples and singles. An earlier version of this article incorrectly said the 39.6% top rate would apply to all income over the $200,000 and $250,000 thresholds.

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